Supply and Demand

My son is taking economics this year, a class that wasn’t even offered when I was in high school. Which gives him yet another reason to be thoroughly convinced that he knows more than I do.

Despite the smugness in my son’s voice when he throws around words like micro, macro, supply side, and supply and demand, I’ve decided that it might not be a bad idea to have high school kids take economics. At least now they’ll know that the government isn’t messing up their lives arbitrarily; there are sophisticated theories to explain exactly how and why the government is messing up their lives—though those theories apparently can’t explain how to keep their lives from getting messed first place. After all Bernie Madoff had wonderfully convincing theories; and all the people who invested with him studied economics.

Personally, the only time I ever pay attention to something like supply and demand is when I’m buying gas. At those times, supply and demand seem to be a form of karma that says when I am low on supply they are going to demand a lot at the pump.

According to my son, supply and demand, apparently as strict a law in economics as gravity is in physics, says that as something becomes scarce it becomes more expensive. (Which explains why talk is cheap in Washington.)

For instance, there are apparently fewer and fewer college football players who are good enough for the NFL, so the few who are left are getting more for their signing bonus than Roger Staubach got for either season the Cowboys won the Super Bowl. There are apparently fewer and fewer politicians who are not already under indictment, so the ones who are left are getting bigger and bigger bribes. Closer to my pocket book, there’s less and less gas, so what’s left is fast becoming more expensive per gallon that milk. (A hyperbole today; but if my theory, unsophisticated as it may be is right, not for long.)

We all know that lack of oil reserves is why gas is so expensive. We know that’s why it’s so expensive because that’s what the oil companies tell us—the companies who keep posting record profits when every other corporation is standing in line for that 21st Century version of the depression era soup kitchen, the stimulus package.

One paradox that supply and demand has yet to explain, is why in the middle of a recession, a housing slump, and dwindling reserves, there are so many gas stations, and they keep building more. You seldom see a gas station on the corner of a busy intersection unless there’s another gas station on the other corner, and yet a third gas station under construction.

The only other construction that seems to be going on? Banks. They’re building more banks. Banks going up everywhere, proliferating faster than—forget bunnies—they’re going up faster than gas stations. I’m sure that there’s a sophisticate theory to explain that one. We are in a recession, which means money is scarce. According to the logic of supply and demand, if any economic theory can be said to have logic, we shouldn’t need more banks to hold less money. Apparently the bankers haven’t been paying attention in economics class. (Had they, we might not be in a recession in the first place.)

The question that keeps coming back to me, is why we need more gas stations to sell something we have less and less of? I’m sure someone in Washington, even now, is developing a sophisticated theory to explain that one. I have only one suggestion, in the interest of veracity, let’s call it the Bernie Madoff Supply Side Crude Oil Pyramid Scheme, or “Your Money is Our Money—you just don’t know it yet.”